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Exam 18: Portfolio Performance Evaluation

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Question 21

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If an investor buys and holds a stock for four years, earning 15% the first year; -8% for the second; 21% for the third; and 11% for the last year, what was the annual arithmetic return?

A) 9.00%
B) 9.75%
C) 10.00%
D) 11.25%

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Question 22

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When measuring the quarterly portfolio return, a withdrawal near the beginning of the quarter requires

A) no adjustment to the values.
B) a reduction of the beginning and ending values.
C) a reduction of the beginning value.
D) a decrease of the beginning and increase in the ending values.

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Question 23

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The correlation coefficient of the excess returns for Portfolio Y and the market is .8. This means the percentage of excess returns that cannot be attributed to the market is

The procedure in which portfolio performance evaluators design a relevant portfolio for comparison is called

When the portfolio manager identifies the highest certainty equivalent return with the feasible risky portfolio, it is the same as identifying the feasible portfolio that places the investor on the highest possible ___________.

When simple linear regression is used to develop a portfolio's ex post characteristic line, the additional term calculated is the

The _____ method to weight a market index is computed daily by multiplying the level of the index on the previous day by the arithmetic mean of the daily price relatives of the relevant stocks in the index.

A portfolio that only holds stocks in large capital industrial stocks would most accurately use as a benchmark portfolio

What is the annual geometric return for an investor who invests in a stock for 2 years if he earned 18% the first year and a negative 8% for the second?

The measures of portfolio performance that involve beta, the ex-post alpha, and reward-to-volatility measures have been criticized because the rely heavily on the

Portfolio managers who anticipate an increase in interest rates should

The portfolio performance evaluation measure, known as M-squared, uses ____ as the relevant measure of risk and is based on the ex-post capital market line.

To calculate Treynor's reward-to-volatility ratio, the analyst does not need the

The ___ ratio is a measure of risk-adjusted performance that uses a benchmark based on the ex-post security market line.

During the past four years, Portfolio X has had a mean return of 4.3% per quarter and beta of .9. During the same time period, the market averaged a 4.6% return, and 90 day treasury bills averaged a 1.6% return. Compared to the ex post SML,

Which of the following measures of portfolio performance is not based on the Capital Asset Pricing Model?

A portfolio had a value of $10 million at the beginning of a quarter and a value of $102 million half way through the quarter. At this point, there was a deposit of $2 million and the portfolio value at the end of the quarter was $105 million. The time-weighted return for the quarter was

During the past five years, Portfolio A has had a mean return of 3.7% per quarter and a beta of 1.2. During the same time period, the market averaged a 3.2% return, and treasury bills averaged a 2.1% return. The value of alpha a. is

The ex post characteristic line for a successful market timer will be

The correlation coefficient of the excess returns for Portfolio This means the percentage of excess profits attributed to the market is